The company said costs at the 48-year-old power station have been rising due to its age and it is forecast to lose £100 million over the next five years.

This, combined with the impact of environmental legislation and the political consensus that coal has a limited role in the future, make it unsustainable, said SSE.

Paul Smith, SSE managing director of generation, said: "This was a very difficult decision to take because of the impact on our Ferrybridge employees, their families and the community.

"It's been known for many years that the UK would have to phase out coal as it moves towards a more sustainable energy mix. We've sought to protect jobs and invest in the site to keep it running for as long as we possibly could but ultimately we've had to make this regrettable decision today."

SSE said it will redeploy the 172 workers affected by the announcement to other sites where possible.

Mr Smith said: "Our team at Ferrybridge is highly skilled, dedicated, with a strong track record of performance, and we're keen to ensure, where possible, that staff are redeployed across other parts of the SSE group, for example at the nearby Keadby power station, or across the wider business.

"We appreciate it is a concerning time for our employees and our priority is to support them over the coming weeks and months and ensure they have a range of options available to them for the future."

Phil Whitehurst, national officer of the GMB union, said: "This is devastating news for Ferrybridge workers at a station that has years of life left to supply electricity at a fraction of the price of other energy suppliers.

"As things stand the only thing consumers will get from some of these suppliers are higher bills. Unlike Ferrybridge none of the components and little of the labour will be sourced from the UK."

SSE said it was committed to the Ferrybridge site, with a £300 million multi-fuel plant next to the power station due to open before the end of the year. The company has also submitted plans to build another multi-fuel station at the site.

The power station has been operational since 1966 and has two units, which are nearly 50 years old.

Unit 3 is undergoing routine servicing and maintenance and will return to service in August following completion of the planned outage which began in April.

Unit 4 was badly damaged in a serious fire at the site last year and SSE has been pursuing options to reinstate the equipment, but this activity will now stop, although the work to demolish the damaged equipment will continue.

Unit 4 will therefore be removed from service with immediate effect.

The announcement is another blow to the coal industry.

Mr Smith added: "We know that the decision to end coal-fired generation at Ferrybridge will have an impact on the local community and it has not been taken lightly; but, while this was a difficult decision to take, it was the right one.

"Financially, the station is currently loss-making and is anticipated to lose another £100 million over the next five years and environmentally coal is a major emitter of CO2, which means it has a time-limited role in the UK's electricity mix.

"Unfortunately, this means retaining coal-fired operations at Ferrybridge beyond the end of the current financial year is not sustainable.

"Our top priorities will be to keep the site operating safely and effectively for the remainder of its life, and as it moves into decommissioning; and to ensure that employees have a range of options available to them for the future.

"The team at Ferrybridge is highly skilled, dedicated, and with a strong track record of performance. SSE is therefore keen to ensure, where possible, that staff are redeployed across other parts of the SSE group - for example at the nearby Keadby power station; or across the range of other businesses in which SSE is involved.

"SSE will also offer employees voluntary release on enhanced terms."

The power station is in the constituency of Labour leadership contender Yvette Cooper.

Mr Smith told the Press Association that the station's projected losses were "unsustainable", citing economic, political and environmental issues for the closure decision.

He described Ferrybridge as having a "rich history" over the past 50 years, and the site has been a cornerstone of SSE's fleet.

"Our main focus is on the people affected by the announcement," said Mr Smith, who personally broke the closure news to a meeting of employees.

But he said the reasons for the decision applied across the coal sector, with the "direction of travel" being to phase out coal.

"The environmental challenge gets ever tougher," he said.

SSE bought coal from the UK as well as Russia to burn at Ferrybridge, where a similar number of contract staff were employed as full time workers.

The decision to close Ferrybridge increases the threat of winter blackouts and could have been avoided if more support had been available for low carbon technologies with vast export potential, including carbon capture and storage and more efficient coal plants, said the Prospect union.

Prospect official Michael Macdonald said: "This is a consequence of the lack of a coherent plan for decarbonisation. The Government's reliance on significantly higher carbon taxes than the European Union has left Ferrybridge facing a bill of £64 million more than, for example, comparable German power generators and forced the premature closure of a viable plant.

"Not only will this see the loss of 200 highly skilled jobs at the station, and the equivalent in a local economy already reeling from plans to close Kellingley colliery, the loss of a further 1GW reduces the UK capacity margin to virtually zero.

"The lack of a clear road map for decarbonisation means the UK is missing out on the opportunity to reduce carbon emissions by 40% through technology that has vast export potential.

"It also means large industrial consumers will have to shut down operations or switch to inefficient on-site diesel generation at times of peak demand.

"If we are to continue to include gas and coal in the generation mix until 2030, we need a coherent plan for transition to a low carbon future other than further Government subsidises for generation methods that cannot guarantee baseload power and which push up the price for consumers."

Unite national officer Kevin Coyne said the union will press for any redundancies to be voluntary and that the maximum effort is made to seek alternative suitable employment in other parts of the business.

"Today's announcement is a hammer blow for the workers and their families.

"The closure of the power station next March again reinforces the message to ministers that they should speed up the development of alternative technologies, such as carbon capture and storage.

"The issues surrounding the loss-making Ferrybridge are complex - it is 48 years old, there was a serious fire there last year and government policy sees a limited role for coal in the future.

"Ferrybridge also lost out in the capacity market auction which allocates contracts to supply electricity to the National Grid under a government scheme which pays for certain plants to remain online until 2018-2019.

"Unite has repeatedly warned that if the Government does not have a coherent and sustainable energy strategy to meet the future needs of industry, commerce and the consumer, Britain will be in a dark place, literally."

Peter Kiernan, energy analyst at the Economist Intelligence Unit, said: "Last year the UK saw a drop in coal-fired power generation of over 25%, with power generated from coal falling to its lowest level in several years.

"Plant closures, lower electricity demand, and a rising share of renewables are squeezing coal out of the system, in addition to more competitive natural gas prices. Furthermore, some coal plants in the UK, and across Europe, will close in the coming years as they opt out of the EU's large plant combustion directive.

"As a result in the longer term the role of coal-fired power in several countries in Europe will be diminished, facilitating further reductions in power sector emissions. Last year emissions from installations that participate in the EU emissions trading scheme fell 4.5%, and going forward the EU will meet its target of a 20% cut in emissions from 1990 levels by 2020 well in advance."

Ms Cooper said: "This is awful news not just for the 170 people who are employed directly but also for the hundreds of contractors who are set to lose their jobs as well.

"I'm seeking urgent meetings with SSE and the unions to see what can be done, especially given that Ferrybridge hasn't reached the end of its natural life. We also need the best support for the workforce.

"This is devastating for Ferrybridge and the area and comes on the back of job losses at Kellingley Colliery as well. There is no Government plan to support high skilled jobs - either supporting existing jobs, or promoting new high skilled jobs for the future."

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